B004E3WO62 EBOK

by Morton J. Horwitz

  It has now become a familiar criticism of Llewellyn that in drafting the Uniform Commercial Code to reflect mercantile custom, he endowed economically dominant commercial practices with undeserved normativity.104 So, for example, he chose to represent the custom of bankers, not of consumers, as representative of commercial custom.

  The point is not that Llewellyn preferred bankers to consumers, but rather that inherent in the turn to society was the need to represent commercial custom as homogeneous. If one's central concern is to make law reflect society-in Fuller's language, to make the Ought acquiesce in the Is-then what does one do when the Is unfortunately offers conflicting messages because society expresses heterogeneous principles? If the motive for turning to society in the first place is to evade a paralytic choice among subjective values, then how can one choose between conflicting customs when that choice simply renews the question of value? To appreciate this dilemma is to see why the Realist turn to society carried within it a strong tendency to wish to portray the social-or commercial-world as homogeneous. Only a society without fundamental conflict could avoid a choice among values.

  Here was the "reactionary principle" that Fuller insisted Realism "[carried] within its loins." Not only was there increasingly urgent pressure to make the status quo the benchmark for all criticism. The adoption of social science methodology also reproduced the same dilemma that customary law theorists like James Coolidge Carter encountered at the end of the nineteenth century. How was it possible to base law on custom when an increasingly heterogeneous society generated conflicting social customs? Like the customary law theorists, some Realists became committed to denying or suppressing any picture of sharp or irreconcilable social conflict as they renounced all efforts to assert a system of values independent of the existing structure of power. Realism thus became increasingly apologetic as it enthusiastically fit into the dominant forms of post-World War 11 consensus theory, also developed to evade the question of value.

  It was a triumphant note that James M. Landis struck as he delivered the 1938 Storrs Lecture at the Yale Law School. Just a year earlier, Landis had resigned from the chairmanship of the Securities and Exchange Commission to return to Harvard Law School as the youngest dean in its history. Now Landis would articulate the New Deal's most penetrating and passionate defense of the dramatic growth in administrative regulation.

  As Landis spoke, it appeared that the last barrier to New Deal regulation, the U.S. Supreme Court, had finally crumbled. Just two years earlier, the Court had compared the behavior of Landis's own Securities and Exchange Commission to "those intolerable abuses of the Star Chamber."' "The action of the Commission . . . is wholly unreasonable and arbitrary,"2 wrote ("thundered," Landis said)' Justice George Sutherland. "It violates the cardinal precept upon which constitutional safeguards of personal liberty ultimately rest-that this shall be a government of laws. . . ."' Where "the mere will of an official . . . is permitted . . . to supplant the standing law as a rule of human conduct, the government ceases to be one of laws and becomes an autocracy."5

  "Such an outburst," Landis observed, "indicates that one is in a field where calm judicial temper has fled."' Justice Sutherland's "invective" "was naturally seized upon by every opponent of security regulation. . . . If it is fair to apply the legal rule that one intends the natural and probable consequences of his acts, certainly the effect if not the purpose [of Sutherland's opinion] was to breed distrust of the administrative."'

  But there was reason to hope for the future, Landis continued. "[A] world of difference in temper and in outlook separates the denunciatory fervor of Mr. Justice Sutherland . . . from the hope of the administrative process" 8 expressed in Justice Brandeis's opinion for the minority, Landis declared. "The minority is not only sympathetic with the administrative process; it hopes to encourage its capacity to dispose more effectively of the business entrusted to it."9

  From its earliest embodiment in the Interstate Commerce Commission (1887), federal administrative regulation had met regular and persistent judicial efforts to confine its scope and limit its powers. The attack on administrative "autocracy" was often simply a stand-in for opposition to or fear of governmental regulation. The form was only incidental. But for others, the rise of the administrative state raised the most basic questions about the meaning and continuing viability of the "rule of law" in situations where unelected officials exercised enormous and unprecedented power to affect the lives and property of citizens.

  Only three years before, in the midst of the Great Depression, the Supreme Court had unanimously struck down the National Industrial Recovery Act, the centerpiece of the first New Deal.` Yet there were now at least four justices on the Court who, Landis concluded, had already taken the pro-administrative position on "[t]he most disputed field of judicial review over administrative action today," the question of finality of administrative findings of constitutional or jurisdictional fact." "In view of these divisions, the law as to what finality shall attach to administrative findings of fact is likely to reflect the minority's rather than the majority's view," Landis predicted.12 `Because their reasoning seems more to accord with the temper of the times, it is they, rather than the majority, who are likely to gain adherents to this position."13

  Landis left it to his audience to realize that his prophecy had already become reality. Not only had the Supreme Court appeared to have reversed its constitutional direction dramatically during the previous year, but in fact, one of the Court's conservative "four horsemen," justice Van Devanter, had resigned, to be replaced by Hugo Black. By Landis's own count, there was now a proadministrative majority on the Court.

  Landis's lectures, entitled The Administrative Process, left little doubt that he believed his own views were in tune with "the temper of the times." 14 He declared:

  Despite [a] chorus of abuse and tirade, growth of the administrative process shows little sign of being halted. Instead, it still exhibits the vigor that attends lusty youth . . . its extraordinary growth in recent years, the increasing frequency with which government has come to resort to it, the extent to which it is creating new relationships between the individual, the body economic, and the state, already have given it great stature. 15

  Landis presented a more comprehensive defense of the growth of administrative agencies than any that had been offered up to that time. And since his vision began to come under attack almost as soon as it was presented, it would do well for us to pause for a moment and explore his thinking.

  Landis's defense of the administrative process began with a classic synthesis of Progressive and Legal Realist attacks on the inefficiency of the judicial process and on the inability of judges trained in common law methods of thought to bring either consistency or deep social understanding to the task of regulation.

  First, he catalogued fifty years of accumulated Progressive assaults on the idea that courts and judges were either institutionally, ideologically, or technically competent to promote justice or efficiency in economic regulation. The expansion of administrative agencies, he wrote, "sprang from a distrust of the ability of the judicial process to make the necessary adjustments in the development of both law and regulatory methods as they related to particular industrial problems." 16

  The institutional limitations of courts meant that judges were "jacks-of-alltrades and masters of none."" Regulation required not only "specialization" but "a method that calls upon other sciences to provide the norms." 18 Understanding business problems, for example, required knowledge of "incredible areas of fact" as well as "wisdom in the ways of industrial operations," none of which judges possessed. 19

  In regulatory fields such as unfair competition, monopoly, and labor, "there was widespread distrust of the courts' ability to evolve workable concepts to direct the economic forces which had posed these problems."" This distrust arose from a "belief that the men who composed our judiciary too often held economic and social opinions opposed to the ideals of their time. The distrust was not
without foundation." 21

  Moreover, the common law system of case-by-case adjudication provided a too "slow and costly method of making law."22 It left enforcement of regulations to inconsistent private initiative, based on the view that government was in "the position of an umpire deciding the merits upon the basis of the record as established by the parties."23 But "the umpire theory of administrative law is almost certain to fail" where "the absence of equal economic power generally is so prev- alent."24 By contrast, since administrative regulation does entail "the power to initiate action," 15 it "permits the development of consistency" in the approach to complex regulatory problems.26

  But beyond emphasizing the limited institutional ability of courts to apply consistent policy across a complicated, interdependent economy, Landis reiterated the Legal Realist attack on the formalism and conceptualism that orthodox judges had brought to their task.

  [T]here are certain fields where the making of law springs less from generalizations and principles drawn from the majestic authority of textbooks and cases, than from a "practical" judgment which is based upon all the available considerations and which has in mind the most desirable and pragmatic method of solving that particular problem.27

  Progressive legal thinkers, Landis observed, had frequently pointed out that solutions to industrial problems "were determined much less by accepted 'legal principles' than by given political, economic and social considerations. . . . [T]hese juristic writers thereupon crossed the Rubicon of legal tradition to declare openly that judges made rather than discovered the law."28 They had, in the process, sought to make social engineering through law legitimate.

  But what gave unelected administrators legitimacy to engage in regulatory tasks? Expertise, Landis confidently declared. "With the rise of regulation, the need for expertness became dominant; for the art of regulating an industry requires knowledge of the details of its operation. . . ." Because of "the advantages of specialization,"29 "[e]fficiency in the processes of government regulation is best served by the creation of more rather than less [sic] agencies." 30

  Landis's The Administrative Process is a joyous celebration of the virtues of "expertness" in justifying the growth of the administrative state. This turn to expertise also represented an historic shift away from the delegation theory of administrative law that had legitimated the exercise of bureaucratic power during the previous fifty years.

  The Delegation Theory

  When the first institutionalization of the regulatory state, the Interstate Commerce Commission, was established in 1887, separation of powers theory created the framework for conceptualizing administrative action. Administrative officials were classified as part of the executive, whose function was to carry out the commands of the legislature. Under this view, the legislature would decide all questions of policy and establish clear standards and goals. The essential task of bureaucratic officials was to find the most efficient means to implement clear, legislatively elaborated ends. The courts' role was to police this relationship by limiting administrative authority to clear delegations of power from the legislature. 31

  The delegation theory reflected the dominance of the German bureaucratic ideal in the late nineteenth century and its twin assumptions that (1) general rules can effectively constrain bureaucratic action and (2) the relationship between bureaucratic means and legislatively established ends was essentially a technical or scientific question. i2 Landis was calling these assumptions into question.

  The delegation theory had already been drawn into question by Legal Realists as part of their critique of orthodox legal reasoning. If general propositions did not decide concrete cases in the common law context, was there any greater reason to suppose that general statutory language could provide determinate limitations on administrative discretion?

  The Interstate Commerce Act, with its lengthy and detailed grant of authority, had already exemplified the delegation theory's vision of the legislature as the jealous guardian of governmental power. Yet the subsequent experience of railroad regulation cast severe doubt on the ability of general rules or standards to provide serious guidance for the detailed and complex tasks involved in administrative regulation. Therefore, by the time the Federal Trade Commission was established in 1914, the agency received essentially a blank check authorizing it to eliminate unfair competition.

  In his lectures, Landis contrasted the Interstate Commerce Act, whose detailed provisions gave it the appearance not of "a constituent document" but of "a regulative code," with the Securities Exchange Act of 1933, which vested "broad rule-making powers" in the Commission.33 "Such [broad] delegation of power means, of course, that the operative rules will be found outside the statute book," Landis provocatively concluded.34

  An important part of The Administrative Process was devoted to attacking the delegation theory. Landis derisively referred to the "political conceptualism"" that underlay every attempt to fit administrative agencies into traditional separation-ofpowers thinking. Legislative efforts to create "Procrustean standards" that would limit administrative discretion were the unfortunate result.36 He deplored a "legalistic approach that reads a governing statute with the hope of finding limitations upon authority" instead of "grants of power with which to act decisively." 37 Landis declared aggressively:

  One of the ablest administrators that it was my good fortune to know, I believe, never read at least more than casually, the statutes that he translated into reality. He assumed that they gave him power to deal with the broad problems of an industry, and upon that understanding he sought his own solutions.''

  The "modern tendency" to reject sharp limits on legislative delegation was conducive to "flexibility-a prime quality of good administration." 39 However, while flexibility was a virtue in the hands of the administration portrayed by expertise theory, it also raised the specter of administrative arbitrariness and left the regulatory state open to consistent attack.

  Pound's About-Face

  Hardly had Landis completed his celebration of the growth of administrative power than he encountered a surprising but formidable adversary in Roscoe Pound, his predecessor as dean of Harvard Law School.

  No other American could match Pound's international reputation as a legal scholar. His most original contributions, written primarily before the First World War, had had an enormous influence in shaping the Progressive ideal of social reform through law. Many of Pound's most important early writings were sympathetic to the growth of administrative regulation.

  Pound's famous and controversial 1906 address to the American Bar Association on "The Causes of Popular Dissatisfaction with the Administration of justice" attacked the adversary system for creating a "sporting theory of justice" and stated that many legal disputes could be more efficiently shifted from courts to administrative tribunals.40

  Pound's earliest writings sought to move American jurisprudence away from an overly rule-bound and rigid attitude toward law that he had denounced as "mechanical jurisprudence."" His cyclical theories of legal history were devel oped to explain the process by which legal consciousness became too formalistic and rigid, as well as to show that "discretion" and freedom from rules had legitimate social and historical functions. There was always a conflict between "two antagonistic ideas, the technical and the discretionary," Pound had written. "From time to time . . . reversion to justice without law became necessary in order to bring the administration of justice into touch with new moral ideas or changed social or political conditions."

  The advantages of administrative justice, Pound wrote in 1914, "are those which are claimed for justice without law: directness, expedition, conformity to the popular will for the time being, freedom from the bounds of purely traditional rules, freedom from technical rules of evidence and power to act upon the everyday instincts of ordinary men." Yet, significantly, he was careful to warn that although useful to revitalize a rigid, "law-ridden" system, "justice without law can be no more than a temporary expedient" in the modern state.
42

  Even as late as 1924, in an address entitled "The Growth of Administrative Justice,"43 Pound spoke enthusiastically of the rise of administration. He saw the rise of the administrative state not as "alarming phenomena, indicating a decay in our spirit of liberty" but as the "natural results of the evolution that we have been going through . . . economically and socially; an evolution that has changed us . . . from a predominantly rural agricultural society to a predominantly industrial society. "44

  Troubled by late-nineteenth-century conceptualism, Pound welcomed the factfocused nature of the administrative process. He saw the rise of administration as part of a shift from nineteenth-century ideas of "abstract justice" to twentiethcentury demands for "concrete justice."45 "The last century thought of all legal precepts in terms of rules or principles or conceptions," Pound declared.' "Abstract justice of abstract rules as applied to abstract men was our whole concern. . . . [O]ur individualism of the last century was a theoretical individualism only."47 The law concerned itself only with a "standard individual," "a theoretical individual up there in a vacuum."48

  The rise of administration was "simply a part of that general movement in all human activities, to deal with the individual; not the abstract individual but the concrete human being in a society of human beings like himself."49 Administrative law represented a groping "for methods of dealing with the actual case and not with a theoretical, standard, typical case."50 Answering the desire "to deal with a special case, specially and peculiarly," the growth of administrative law thus challenged "our former methods of broad generalization." 51